Hi

The option to search user doesn't currently search for an exact match, which I can understand the logic, however if you search for a username it doesn't order by the closest match - I am unsure how it orders

Example below, search for a user called "Alan" - and the user with the exact name is 20 users down.

Can this be improved to either sort by last online or closest matches first.

Hi, Alan.

This simple search is rather a context search. It checks if user name contains string of signs. Thats's why all users names that contain "alan" are listed. Simple search doesn't check for accuracy.

If this can be improved? Probably yes. But last word has product owner. You should post a feature request:
uservoice.jomsocial.com/forums/101561-feature-request